Stores (BURL 149.83, +13.30, +9.74%) is trading higher today after reporting strong Q1 (Apr) earnings
this morning. The company operates a national chain of off-price retail stores
(647 current locations) offering women's, men's, and children's apparel and
accessories, home goods, baby products, and coats, principally under the name
Previously known for decades as Burlington Coat Factory, the company was taken private by Bain Capital in 2006. Once acquired, Bain began a restructuring program that streamlined operations, refocused their merchandise (de-emphasizing coats and becoming much more of a general off-price merchandise company), and returned the company to growth.
Its merchandise is deeply discounted, up to 60-70% off department store prices. The company's stores are very large -- two to three times larger than its competitors' stores -- which allows BURL to feature merchandise from over 3,500 vendors, although the focus is on nationally-recognized brands. The company's two main competitors are TJ Maxx (TJX) and Ross Stores (ROST). Big Lots (BIG) is probably in the mix as well.
Turning to the AprQ results, non-GAAP EPS rose 59% year/year to $1.26 from $0.79 in the prior year period. It was well above market expectations and well above BURL's prior guidance of $1.05-1.09. Revenue rose 12.3% year/year to $1.52 bln, which was also better than prior guidance of $1.47-1.49 bln.
Same store comps came in at +4.8% on a shifted basis, which was above prior guidance of +2-3%. It was down a bit from the +5.9% comp in JanQ, but still quite good. For Q2 (Jul), comps are expected in the +2-3% range on a shifted basis. In terms of other guidance for Q2 (Jul), BURL expects non-GAAP EPS of $0.91-0.95, which was in-line with market expectations. Revenue is expected to grow +8-9% year/year. For the full year, BURL upped its non-GAAP EPS guidance to $5.90-6.00 from $5.73-$5.83.
On the call this morning, BURL notes that this was its 21st consecutive quarter of positive comp sales growth. Comp growth was driven by an increase in traffic, BURL's 13th quarterly traffic increase of the last 15 quarters. A key element of its strong Q1 (Apr) performance was the outstanding performance of its new stores. BURL opened 18 net new stores during AprQ and only four in the prior year period. The company is on track to open 35 to 40 net new stores in 2018.
In the quarter, BURL's top performing businesses were all areas of home: beauty, missy sportswear, men's shoes, athletics shoes, and Baby Depot. Regarding geographic performance, the West and the Southwest performed above the chain average while the Midwest comp was below the chain average. The Southeast and Northeast both had strong quarters with sales performance consistent with the chain average.
In sum, this was another good quarter for BURL. It's clear that Burlington's strategy of reposition itself is really paying some dividends. The stock has been impressive over the past year, it's up 80+% since its August 2017 lows. Overall, BURL seems to be performing quite well in a difficult retail environment where others are struggling.
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